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Fraud*According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain*As defined in Wikipedia

Thursday, April 12, 2012

We have been following Goldman Sachs and its relationship with Litton Loan Servicing which was purchased by Goldman in 2007 and sold in 2011. Here are some excerpts from our postings:

Goldman Sachs's opportunistic moves do not always pan out. Take Litton Loan Servicing which Goldman bought in 2007 when it was trying to obtain as many sub-prime mortgages as it could in order to concoct those CDOs that it foisted on unsuspecting buyers before the financial meltdown in 2008. Goldman Sachs is now considering selling this company.

Goldman Sachs's actions surrounding Litton lie at the heart of the fraudthat Goldman Sachs perpetrated, not only on the homeowners of the US but also on the pensions and savings funds that bought the highly rated CDOs that Goldman Sachs touted.

Goldman Sachs had to buy a less-than-sterling company in the hopes of keeping its CDOs rolling along and raking in the money but Litton proved to be a horror show for hundreds of the homeowners who were caught in its snare. Customers who were unfortunate enough to buy their mortgages through Litton have a great deal to complain about. See the hundreds of complaints against Litton listed here. (From Wednesday, March 16, 2011, post here)

And then there is the Litton Loan Servicing unit which Goldman Sachs would very much like to sell and about which we posted information earlier here. There are hundreds of complaints by Litton customers which you can read about here. Since we first linked with the complaints page, there have been even more complaints accruing! No wonder Goldman Sachs would like to unload this tarnished little gem!

Goldman Sachs has also disgorged itself of Litton Loan Servicing. You can find some background information on Litton Loan Servicing here and here. As Goldman Sachs itself admits, it does not deal well with retail business. There are many dissatisfied Litton homeowners whose complaints have yet to be heard and dealt with. (From Friday, June 10, 2011, post here)

Lack of empathy characterizes those who greedily obtain wealth by taking advantage of others. Goldman Sachs had a big appetite for obtaining subprime mortgages in order to securitize them and sell them to investors and at the same time bet against the mortgage market to make humungous amounts of money when the mortgage market failed. They helped the market fail and made money off that failure!

Goldman Sachs conveniently places itself outside the world described above as they managed to get rid of their loans before the meltdown occurred, but they still participated in actions that made foreclosures a certainly and urban blight a consequence. Read the memorandum from Levin and Coburn of the Senate Permanent Subcommittee on Investigations, Exhibit #1a page 5 on [after intro page 17]. There are two examples there of Goldman Sachs as "an active participant in the mortgage market, particularly in the area of securitization."

When Goldman Sachs objected to Bank of America's proposed $8.5 billion settlement with investors (including Goldman Sachs subsidiaries!) because it claimed it lacked information, it seemed rather puzzling. Surely Goldman Sachs would jump at a chance to get rid of its MBS liabilities and fraudulent behavior in packaging up sub-prime mortgages, having them highly rated and then selling them to unwary investors before they turned to junk but not before GS earned huge fees and won big hedging bets as the mortgage market failed.

Well, Goldman Sachs is no slouch!

GS has negotiated its own way out of being accused of criminal and fraudulent behavior: it has negotiated its own little deal with a New York regulator, Benjamin M. Lawsky.

The background story about Litton Servicing has been dealt with on our blog here, here and here.

Which is more corrupting--having Goldman Sachs make a settlement deal with lots of promises to be good or having a regulator letting Goldman Sachs off the hook for fraudulent practices? Take your pick: it's both those things.

Goldman Sachs had to make a few promises to the New York Banking Regulator and to the Federal Reserve. Goldman promises to not misbehave so that it can sell Litton Servicing (at a loss). GS is accused of "misconduct and negligence" which is clearly a euphemism for "fraud." Commentators use the words "wrist-slap" and "reprimand" for the actions of regulators and that clearly is the punishment meted out for fraud.

Euphemistic descriptors that do not instill confidence in justice ever being brought to bear on Goldman Sachs will become commonplace because regulators prefer not to use "fraud" or "illegal." Why is that? Instead we have "formal enforcement action" by the Federal Reserve. When someone has done a dastardly deed and you make a "formal enforcement action" against him, it must be a joke, right?

Goldman has to pay penalties (money), answer to civil claims, bring in a consultant to review foreclosures, write down mortgage loan principals to the tune of $53 million (more petty cash), and, apparently, be good in the future. It appears that GS can pay its way out of trouble.

These actions are merely interesting but they do not represent justice for the people who were defrauded out of their pensions, their savings and their home ownership by Goldman Sachs's fraudulent securities. It certainly doesn't seem a proper response to those who brought us this nice recession. (From Friday, September 2, 2011 post here)

Goldman Sachs does not act with ethics or conscience when it comes to making a deal for money. Paying a fine is small potatoes when the firm sets aside $3.4 billion as its cost of doing business. The $53 million principal reduction on Litton mortgages is just as small. How was such an amount arrived at? Were all the mortgages evaluated?

The "illegal" practice of robo-signing is a fraud and should be treated as a criminal charge. HAMP appears to lessen Goldman Sachs's culpability. Shouldn't GS strive for the "highest" standard rather than just a "new higher standard." It's all hogwash.

The best sentence of all in the article, the one that made me spew my coffee all over my keyboard was the utterance by Lawsky:

“Goldman Sachs, Ocwen and Litton have now all agreed to put the rights of homeowners ahead of their profit margins by implementing these changes.”

When Pigs Fly!

The Federal Reserve Board (where was IT during the 2006-2008 years?) comes forth mouthing platitudes too. GS has "requirements" to live up to also. Where are the words "FRAUD" and "CRIMINAL BEHAVIOR?" When GS didn't behave ethically (and they didn't), they should be charged and judged by the Justice department.

Banks shouldn't just "consent to enforcement requirements." They should be compelled and ordered to follow the rules laid down in the regulations and pay penalties including jail time when these are not adhered to.

How cozy are banks to regulators and the Federal Reserve! Just follow the Goldman Sachs guys who are now in government and in regulatory positions. It is no wonder that Goldman Sachs has no credibility. (From Tuesday, September 6, 2011 post here)

Now we have some more information about Litton from ProPublica that tells about Chris Wyatt, a former employee of Litton Loan Servicing when it was a Goldman Sachs subsidiary. The shoddy practices that he describes tells the other part of the story about how wonderful a bank Goldman is!

As of the end of 2010, fewer than 12 percent of the borrowers who'd applied for a HAMP modification with Litton were granted one. The vast majority of those denials, Wyatt says, were not legitimate. Goldman Sachs' emphasis on maximizing profits rather than preventing foreclosures is typical of the servicing industry, he says, particularly the larger banks.

Read the entire article here and the longer history of foreclosure here

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The men the American people admire most extravagantly are the greatest liars; the men they detest most violently are those who try to tell them the truth. … H.L. Mencken

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It is impossible to calculate the moral mischief, if I may so express it, that mental lying has produced in society. When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe he has prepared himself for the commission of every other crime. … Thomas Paine 1737-1809, Anglo-American Political Theorist, Writer

Laws just or unjust may govern mens actions. Tyrannies may restrain or regulate their words. The machinery of propaganda may pack their minds with falsehood and deny them truth for many generations of time. But the soul of man thus held in trance or frozen in a long night can be awakened by a spark coming from God knows where and in a moment the whole structure of lies and oppression is on trial for its life.: Sir Winston ChurchillWhen governments fear the people, there is liberty. When the people fear the government, there is tyranny. - Thomas Jefferson

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